How is Math Used in Money? (2024)

Well, money is a lot of math.

Let’s say you simply walk into a shop to buy a new book. What is it that you’d do first? Get to know the cost and ascertain whether you have that much money right now. If you’re paying cash, you’d check the denomination and handover the required amount, taking back the balance due to you.

If it’s a larger purchase using your debit card, you’d want to ascertain whether you have that much in your savings bank account and swipe your card.

But what if you’re drawn by the several advertisem*nts for the zero percent EMI (equated monthly installments) on loans? And now you’re thinking: Would it make sense to pay cash upfront and buy or go the EMI route⏤it’s zero percent interest anyway, isn’t it?

Many would feel the EMI option is a good bargain. And without thinking twice, pay the processing fee and sign on the dotted line. Give it a thought⏤is it actually zero percent? Then how do these finance companies benefit?

Whichever way it is, you’d be using the basic concepts of maths⏤addition, subtraction, multiplication, and division.

Value of Currency Falls

It’s also important to know that currency value falls over a period of time. And you’d have heard from your parents and grandparents about how much more they bought for a certain amount, let’s say Rs 100, many years ago as compared to what you can get today. Simply put, that’s the value of money falling over a period of time.

Inflation

We all know that inflation eats away savings and brings down the value of money. That’s why while calculating returns on investments, you need to factor in inflation, or else the real return may end up being negative. Now if you’re wondering how easily experts predict the market and invest wisely, you’re mistaken. Predicting the market has never been possible for anybody. What the wise do is spread their risk and play smart. That way, the higher returns from a certain asset class will outweigh the risks or lower returns from another, leaving them in a better financial position.

Making Wise Money Decisions

Financial literacy plays a major role. Being financially literate means knowing how to make wise money decisions, understanding the pros and cons of a financial decision, how much to borrow, spend, how interest rates function, what budgeting is, the power of compounding, and a lot more.

Financial Literacy for Children

You’d think financial literacy is largely for adults, but it’s important to introduce children to the joys of math at an early age and nurture them with the right skills with regard to money. While school teachers ensure that children learn math in a class by explaining concepts and giving enough and more homework, that isn’t really enough. Learning is faster when these concepts can be tried and tested in the real world.

Make Math Fun

And parents need to ensure that children are introduced to money lessons at home so they can relate to it all easily. That way, children are able to learn to solve problems and analyze better. Otherwise, it can become all theory and boring. Besides, doing math regularly helps them exercise their grey cells and develop reasoning. Learning math becomes more fun. No more fear of numbers or dislike of math.

Math lessons can begin with everyday activities at home. Take them along while shopping and value their opinion on a certain purchase. Let them feel important.

There are many digital resources too⏤saving and budgeting apps can help track gains and spends for a certain period, enabling children as well as adults to improve their financial knowledge.

Teach Them the Importance of Savings

Children need to know the importance of savings. Start with a piggy bank to inculcate valuable money lessons. Give them a small amount as pocket money on a monthly basis and let them track their spending. Let them do the math⏤addition, subtraction, multiplication, and division⏤and learn for themselves.

Parents can also consider opening a savings bank account for them. Having their own ATM card with their name printed on it will delight them to no end. Monetary gifts that children receive from family members, relatives, and others on birthdays and special occasions can find their way to the bank.

Set spending limits for your children every month and watch them beam with pride when they come up with instances of how they’ve stopped making unnecessary demands. Reward them well⏤even a simple pizza treat or an outing with family could help boost their self-esteem.

Children can be adamant at times. Try explaining to them why a certain purchase cannot be made at the moment. Teach them about money goals. Let them save small amounts of money at regular intervals. A lump sum at the end of a certain period can fund a small buy that’ll excite them and inculcate the importance of money too.

Love for Math

When it comes to inculcating love for math⏤earlier the better. Encourage children to ask questions, make math learning fun, let them know that math is not just about formulas, but also about coming up with new ways of thinking and solving problems. Coming back to the big purchase on EMI mentioned above, truth be told, paying cash upfront makes more sense, as you’d benefit from a cash discount. On the other hand, with the EMI option, mind you, it’s not actually zero percent interest. A component of the total cost is included in the processing fees charged, and your total amount goes up. In short, you end up paying more. So, master the basic concepts in order that you can make the right decisions and play smart.

Finally, it’s all about developing curiosity in children. And it’s the combined effort of parents and teachers to spark that curiosity and interest in math for a successful future ahead.

Read some of the other articles on BYJU’s FutureSchool blog to learn more about math and money. Let us know your feedback below.

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